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The Drucker Exchange

The Tao of Data

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Following a little on the theme of my post last week about being well-rounded, The Drucker Exchange recently had a post about balancing quantitative and qualitative mindsets.

Because there is such a focus on the quantitative these days with people encouraged to enter STEM fields and schools’ value being judged on the basis of test results, the arts community has been pushing back by touting the value of the arts. Though often it is in the context of these same quantitative measures: test scores, economic impact and earnings.

The Drucker Exchange post, as well as the Wall Street Journal column by Thomas Davenport that inspired it, note that like the peanut butter and chocolate of a Reese’s cup (my metaphor), quantitative and qualitative are most effective together.

Despite years of work at providing both knowledge and quantitative analysis to decision-makers, there is scant evidence that we have really improved decisions—so we have our work cut out for us.

At heart I think the historical separation of knowledge and numbers people is a “Two Culture” problem, made famous by C.P. Snow. Knowledge management people are humanities/liberal arts types, and analytics people are math/science types. We need to get them together, however. Almost all key domains of business–including customer insights, understanding the broader business and economic climate, and various approaches to performance improvement—involve both qualitative and quantitative content. The best decisions and the best organizations will make effective use of both.

In my post last week, I suggested that the scientists quoted in the Salon article felt their scientific investigations were enhance by their artistic pursuits. Peter Drucker apparently said much the same thing, but observed the same is true for someone in the humanities in relation to science.

“We will have to demand of the scientifically trained man that he again become a humanist; otherwise he will lack the knowledge and perception needed to make his science effective, indeed to make it truly scientific,” Drucker warned. “We will have to demand of the humanist that he acquire an understanding of science, or else his humanities will be irrelevant and ineffectual.”

From time to time, I also write about what value arts organizations might bring to businesses. Thomas Davenport talks about how people with the qualitative mindset can help the analytically minded tell a clearer story about their data.

Knowledge people are good at dealing with text, and some would probably be able to extend their skills into text mining and analytics. Knowledge management practitioners are also good at capturing insights, and there are many analytical assumptions and results that are never recorded. It’s also likely that some good knowledge analysts could help quants “tell a story with data,” which is something almost every organization is looking for these days.

The companies Davenport is talking about would employ such people full time so it wouldn’t be an opportunity an arts organization could do on the side. Though it certainly points to possible career opportunities for those with a liberal or fine arts background.

Something along these lines could provide a coaching/advisory opportunity on a smaller scale for arts organizations. Ultimately, thinking about how you can help a business tell the story of their data will probably help a non-profit organization do a better job telling the story of their own data on grant applications and marketing materials.

Arts organizations are probably all too close to their own data and tend to see grant reports as a chore. Helping a company in an unrelated field tell their story for an entirely different purpose could cause a shift in perspective that increases their effectiveness in talking about themselves.

Care and Feeding of Arts Workers

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There was a good example of the importance of good leadership and management in the context of orchestras in a recent post on The Drucker Exchange.

Although the post starts out using the example of basketball teams, it ends up citing Peter Drucker’s observation that as a knowledge based institution,

“A great orchestra is not composed of great instrumentalists but of adequate ones who produce at their peak,” he wrote in Managing in the Next Society. “When a new conductor is hired to turn around an orchestra that has suffered years of drifting and neglect, he cannot, as a rule, fire any but a few of the sloppiest of most superannuated players. He also cannot as a rule hire many new orchestra members. He has to make productive what he has inherited.”

The passage in Managing the Next Society that is quoted is preceded a few paragraphs earlier with “In a traditional workforce, the worker serves the system; in a knowledge workforce, the system must serve the worker.”

Orchestra musicians may not appreciate being characterized as “adequate,” but they all know that their ensemble thrives as a group, not on the specific talents of each individual. It is the music director or similar leader who often creates the environment which allows the whole to thrive.

This is much the case in arts administration staffs. There are very few superstars that multiple organizations engage in a bidding war to woo away. (Though I grant it might be helpful to have more exemplars people strive to be. Drew McManus can’t bear the adulation by himself.)

Most arts organizations are staffed by adequately skilled employees who are on the cusp of becoming great with the help of the right management of their talents and work environment. Some of that management is probably going to require better pay and professional development opportunities. It may also require scrutinizing organizational culture, shifting job responsibilities and revamping the physical work environment.

While the focus of all this seems to be on identifying good leaders and managers who will point the way to success, recall that Drucker points out that the workforce has to generally be left intact. They are the core resource of the organization with which the leader must work.

Knowledge workers aren’t like gold fish which will thrive if fed and put in a bigger, cleaner fish bowl. Dealing with them is far more complicated. It is by their will and agreement that success occurs.

A good leader or manager is merely one who perceives how to best structure the system to serve the workers. A leader shouldn’t conflate their ability with the value of the organization. Ultimately, audiences will come to see a bad orchestra before they come to see a music director in an empty room.

Value Is Not Price

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The Drucker Exchange recently noted that the Cincinnati Reds and Michigan Wolverines teams have started using dynamic pricing, scaling prices based on popularity.

The Reds don’t provide much information about their structure, though they promise the price will never fall below whatever the season ticket holder pays. They set their base pricing at the start of the season per anticipated demand and start implementing the dynamic pricing two weeks out so it probably pays to buy early.

The Wolverines basically set their anticipated pricing from the start ranging from $65 for the Akron game, $10 less than last year, to $195 for the Notre Dame game, $100 more than last year. (And by the way, that is the lowest price tickets. Their top tier tickets for Notre Dame are $500.)

The piece on The Drucker Exchange says the mistake companies often make is to ask what customers value. This is aptly illustrated by the secondary market for those Wolverines games. You can get those $65 Akron tickets for $35 on the secondary market, but those $195 Notre Dame tickets seem to be going for about $319 already. (Single tickets go on sale tomorrow, 8/1)

Peter Drucker lamented how few companies recognize the importance of simply asking themselves what their customers value. “It may be the most important question,” Drucker noted in Management: Tasks, Responsibilities, Practices. “Yet is the one least often asked.”

One reason for this is that companies think they already know. “Value is what they, in their business, define as quality,” Drucker wrote. “But this is almost always the wrong definition.” For example, for a teenage girl, “value in a shoe is high fashion,” while durability and price matter little.

“Another reason why the question ‘What is value to the customer?’ is rarely asked is that the economists think they know the answer: Value is price,” Drucker added. “This is misleading, if not actually the wrong answer.”

For instance, electrical contractors, while famously price-conscious, may prefer one of the most expensive fuse boxes on the market. “To the contractor this line is actually low-priced because it is engineered to be installed fast and by relatively unskilled labor,” he explained.

The ultimate lesson is simple but not easy: “The customer never buys a product,” Drucker wrote. “The customer buys value.”

(My emphasis on that last sentence on the Drucker citation)

There are many intangibles that factor into what people value. Will the Notre Dame game be three times better than Akron? Possibly. By game day in September, there is a fair chance the primary market tickets to the Notre Dame game will be four or five times more expensive than Akron, if not more.

There will be a point where the quality of the actual Notre Dame gameplay can’t be better than that of Akron in proportion to the difference in ticket price.

What people are willing to pay so much more for is the experience of tailgating and attending a potentially great game steeping in the palpable excitement surrounding the long rivalry between the two teams with thousands of others.

I have resistance to dynamic pricing for a number of reasons, many of which have to do with the relationship I feel we are trying to cultivate with our audiences.

The question is, do people really recognize and value that we are making the effort? Is it all pretty much one-sided? Many people don’t really discern between profit and non-profits organizations when making their entertainment decisions.

Are non-profits basically putting themselves at a disadvantage by not using dynamic pricing for shows that clearly will sell out months before the performance date based on a devotion to an audience that has no idea the organization has decided to suffer for their benefit?

There is a need to keep prices low to provide affordable access. If 900 people clearly value attending a performance that they will commit at $25 a ticket between one and three months before the show, do you really owe it to the last 100 people to maintain the $25 rate until they get around to buying tickets?

Or do you owe it to your long suffering staff to try to increase the revenue stream so you can pay them $12/hour instead of $8 by using dynamic pricing?

We aren’t sure about the investment of the community in your organization, but we can be more certain about the investment of your staff.

I am still a little uncertain about dynamic pricing. The issues aren’t as clear as I present them here. However, one issue I don’t generally see people mention in the dynamic pricing conversation is that by not using it you are potentially punishing your staff in the service of an ideal the community may not be aware of much less value.

If customers show they willing to place a higher value on a product, should non-profits acknowledge that by placing a commensurately higher price on it?

Stuff To Ponder: Subscriber Rush Tickets

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Since I have started a new job I am in the process of evaluating every document, process and interaction my organization undertakes. One of those areas is customer service, of course.

For that reason, an article I came across via The Drucker Exchange is really resonating with me. In a blog post titled, The Dark Side of Customer Experience, Monique Reece opens with a joke we can probably all relate to.

The longer version is in the post, but basically a guy dies and is shown heaven and hell and given a choice between the two. On his visit to heaven, everything is sedate and lovely. Hell is a veritable Mardi Gras party. After the doors close on Hell, the guy tells St. Peter he chooses Hell. The doors open and it the scene is the stereotypical hellish landscape.

Upon wondering what happened to the party scene, the man receives the response “Well,” said St. Peter as the doors closed. “The first time you came to visit you were a prospect. Now you’re a customer.”

Reece cites some of my biggest pet peeves– the introductory rate that rewards new customers and makes the person who has been loyal for 10 years, enduring price increases, feel like an idiot for sticking around so long for no recognition or reward. As Reece notes, there is actually more of an incentive to separate your relationship and then renew it.

The performing arts version of this is giving cut rate discount tickets to last minute purchasers, suggesting a certain amount of foolishness on the part of those who planned and purchased ahead of time. Some arts organizations sell large amounts of rush tickets at rates lower than those of subscribers who have committed to many shows in advance.

It just occurred to me moments ago, why don’t performing arts organization offer Rush tickets exclusively to those who have already purchased two or more tickets?

This would have multiple benefits 1- It rewards people who committed in advance; 2- It turns those people into recruiters for your show when they invite their friends along; 3- It gets people you already have a relationship with paying closer attention to your emails or social media account that you are using to communicate this discount, providing an opportunity to get them excited and mention other shows.

My suspicion is that attending a show on a half price ticket thanks to two people who purchased weeks in advance is a better model of behavior than attending alongside two other people who also decided to attend because tickets were half price.

It probably also reinforces many elements of the advance purchasers’ self-image if they know their friends were only able to attend because they were stalwart supporters of the arts organization.

The only real problem I can see with this idea is reserved seating. Offering rush tickets in this way appeals heavily to a social element which is compromised if everyone can’t sit together.

Granted, it illustrates the appropriate outcome associated with paying half price on the day of a performance versus full price in advance. Still the emotional disappointment of not being able to sit next to ones guests could supplant the acknowledgement of this logical consequence.

General admission events are good to go though.

This is not the direction I intended to go in when I started this entry. I like this result better.

Be Here, With Me

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Like many of you, my dear readers, I am of a split mind about the inclusion of social media in live performances. Overall, I think this is a good place to be. I have often written here that one should not jump on the hottest trend, but obviously one should not entirely dismiss it. A healthy mix of skepticism and self-education on the matter is valuable.

There was recently a post on the Drucker Exchange that pushed me toward the “against” column. I have talked about the benefits of tweet seats and such in other entries so I am not going to try to balance the “con” argument here.

In reference to employees using headphones and having social media chat window open at work, the Drucker Exchange piece cites former entertainment executive Anne Kreamer,

“The majority of these young workers said that they felt far more connected moment to moment with people outside their workplaces than with any co-workers,” she writes. The problem, according to Kreamer, is that they miss out on crucial exchanges, become less loyal to the company and one another, and innovate less. As studies on innovation show, physical proximity matters.

… For one thing, it’s the reason many people go to work at all. “Work is for most people the one bond outside of their own family—and often more important than the family,” Drucker observed in People and Performance. “The work place becomes their community, their social club, their escape from loneliness.”

[…]

More important, such contact influences productivity, and creating satisfying informal work arrangements among co-workers is especially important for good output. Research conducted by General Motors during the 1940s, for example found that “‘good fellowship’ or ‘good relations with fellow workers’ showed as the leading causes of job satisfaction,” Drucker recalled.

The Drucker Exchange piece echos a rhetorical corollary many arts people ask of those who feel the need to engage in social media exchanges during a live performance experience, “What is the reason you come to the performance at all?”

For many it may be that a friend or significant other encouraged them–but then they aren’t really dancing with the one that brought them, either. (Though granted, that person may also be connecting with outsiders as well.) Or maybe they are getting extra credit for a class or looking to advance their career.

The mention that employees who isolate themselves in this manner at work are less loyal to the company makes me think audience members who do the same probably aren’t developing a lot of loyalty to the arts organization. True, the act of actually writing about what they are seeing may actually forge a connection that passively watching the show wouldn’t, but there is no guarantee the person is relating their feelings about the show.

While arts organizations probably can’t have the same expectations about audiences they could during the days of high subscription rates, audience churn is a big problem. It costs a lot more to attract a new attendee than to maintain a relationship with frequent attendees. It seems ill-advised to encourage activities that don’t cultivate a connection and may even erode it.

Simply forbidding people to use mobile devices isn’t going to magically result in the scales falling from people’s eyes and have them realize how disconnected they were. The arts organization has to provide a reason to get engaged in the immediate experience as an alternative to connecting to friends who are elsewhere.

As much as we may want to believe it, the experience of the performance may be insufficient to get a person invested. For some people, texting, tweeting, etc may simply be filling the void of uncertainty about the experience with a safe activity.

The solution may not be any more complicated than encouraging front of house staff to actively ask people what brings them to the performance and find out what their expectations are. Or perhaps changing the layout of the lobby to facilitate people gathering and chatting in certain areas. Essentially replace the friends who are elsewhere with friendly faces right where they are.

This song went through my mind as I wrote this entry-
http://www.youtube.com/watch?v=LkiU4ruREgI

Recognizing Your Customers

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There has been a post on The Drucker Exchange that has been nagging at the edge of my unconscious for a couple weeks now. Actually, it was one line from a news piece about how the Massachusetts Department of Transportation has been able to replace bridges in days rather than years.

“The highway department didn’t use to see the drivers as customers,” Frank DePaola, administrator of the highway division for the department, told the Times. “For a while there, the highway department was so focused on construction and road projects, it’s almost as if the contractors became their customers.”

There is obviously a lesson here for all businesses, including arts organizations about taking a step back and re-evaluating who your customer is. Often times it is multiple people.

Adam Thurman illustrated this in a post he made yesterday about buying a suit.

“He told me that he understood that no one really needs a suit…
[…]
He understood that people aren’t really paying for a suit, they are paying to work with a person that truly gives a damn about how they look. They are paying for the feeling they get when they look good.

It takes a certain humility to embrace that thought. It takes a humble artist to understand that it isn’t all about her or her art, it’s about the audience and the feeling they get from the experience.”

I actually took the time to follow a link in the Drucker Exchange post to one of Peter Drucker’s books, Management: Tasks, Responsibilities, Practices where he talks about the fact that there are often many customers that have to be pleased. For example, in some cases, it might be both the consumer and a government regulator, each of which have vastly different definitions of what they value.

Another example Drucker gives addresses how people’s priorities change over time–a teenage girl wants the most stylish shoes with price being a lesser concern and durability being of no concern. Her older sister (or the same girl in a few years) will have these same priorities in different proportions.

Arts organizations have seen this effect. When people reach a certain age, they tend to gravitate toward the arts more frequently than when they were younger because their priorities change. The challenge being faced now is that overall social priorities have gradually shifted over time as well so while people’s priorities still mature over time, the way they choose to express those priorities are manifesting in a different manner.

So in the context of all this, one of the challenges I constantly face in serving my customers is the perception that our theatre is hard to find and get to. Even though I recognize this is a need to be served, it really confounds me and is therefore somewhat akin to my not recognizing who my customers are.

There are standard department of transportation road signs directing people to us from 2-3 miles out. To get to the theatre from the highway, you make a right, go three lights, make left, go to the bottom of the hill, make a right, make a left and you are pretty much delivered to the campus. It is generally straight drives and right angles. There are no confusing one way streets to navigate. Everything is well lit and on major thoroughfares with regular signs. Parking is free and plentiful.

I understand that people might overlook the signs, obvious though they are. We offer directions and maps for download off our website that include reverse directions so that you can get back home. We have copies of those directions available in the lobby as well as people depart.

We have a dedicated directions line you can direct dial to, which from the feedback we have gotten, I suspect people are listening to on their cellphones as they drive.

My suspicion is that “hard to find” really means they are unfamiliar with the location because they don’t drive by the neighborhood on a regular basis. We are separated from the local retail area by an interstate and there is no reason to drive across unless you attend school or live in the neighborhood.

The other problem is that most people probably use GPS or Google Maps instead of checking our website for directions. Unfortunately, the shortest distance route actually makes you get off the highway three miles early and takes you through a zillion stop lights. At certain times of the day, that route can easily add an hour travel time due to traffic.

These aren’t things I can solve, though I am always looking for options. One thing I will try to do is communicate the sources of reliable information more frequently via various channels before people embark on a trip to the theatre.

If anyone has suggestions or stories of how you solved this sort of problem, I would love to hear about them.

Joe Patti's Musings on practical solutions for Arts Management

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Butts In The Seats by Joe Patti is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.
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